Tip #6: Pay Your Taxes Annually…or Use Your City’s Monthly Installment Tax Payment Plan
This Tip doesn’t really fall under the category of saving you thousands of dollars, but it does save you money…and every little bit does count.
Normally, consumers allow their bank to collect the taxes for them. The bank will usually collect 3 or 4 months worth of taxes and hold it in a tax account. The institution then adds a portion of your annual tax bill to each payment you make from then on.
They do this for you, as a favor, to ensure you never have to worry about not paying your annual taxes. What we fail to realize is that your city has a program to do the same thing. The big difference is that your local tax collector offers a program where he divides your annual tax bill into 12 equal payments. Each month he or she is authorized by you to withdraw these payments directly from your account.
“So, how do I save money this way?”
As mentioned above, those 3 or 4 months worth of taxes that the bank collects from you is kept in a special tax account for your benefit…but…the bank doesn’t pay you interest on it or, if they do pay you interest, they pay very little. So, instead of you making even a little interest on this money, it ends up working for no one.
At least this is what we are led to believe; I have never gotten a straight answer when it comes to any inquiry as to where or to whom all this money goes. There are rumors that the bank lends this money out as short-term loans such as overdrafts, ex: 21%.
“So what do I have to do?”
All you need to do today is call your local city tax office and ask if they have a monthly payment plan, and request an application to be mailed or faxed to you. Once you return the application to your tax office you will be enrolled, and your payments will start to be deducted within 30 to 60 days.
NOTE: Always check with your mortgage company first to see if they will allow you to pay your taxes this way. You don’t want to pay double the tax!
Once you make the switch, you will earn the interest on those 3 or 4 payments. It’s not a large sum of money; but it is another way to save on your mortgage.
If you want to avoid the monthly payments, you can arrange to pay your taxes annually when they come due in the spring. You just need to keep your receipt and send a copy to your bank when you make your annual tax payment. It’s a good idea to ensure that your bank gives you the green light on this. Some municipalities give discounts for early payment of annual taxes.
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Daryl Marsden is an Accredited Mortgage Professional with the Canadian Association of Accredited Mortgage Professionals in Canada. He specializes in helping First Time Home buyers and clients with credit issues. Daryl has over 15 years’ experience in helping his clients own their own homes.
Daryl Marsden AMP
P: 403-605-5711 | daryl@maxmort.ca
